Fabian Pamphlet on the Future of Industrial Democracy : Part 1

The Future of Industrial Democracy, by William McCarthy (London: Fabian Society 1988).

A few days ago I put up a piece about a Fabian Society pamphlet on Workers’ Control in Yugoslavia, by Frederick Singleton and Anthony Topham. This discussed the system of workers’ self-management of industry introduced by Tito in Communist Yugoslavia, based on the idea of Edvard Kardelj and Milovan Djilas, and what lessons could be learnt from it for industrial democracy in Britain.

William McCarthy, the author of the above pamphlet, was a fellow of Nuffield College and lecturer in industrial relations at Oxford University. From 1979 onwards he was the Labour party spokesman on employment in the House of Lords. He was the author of another Fabian pamphlet, Freedom at Work: towards the reform of Tory employment law.

The pamphlet followed the Bullock report advocating the election of workers to the management board, critiquing it and advocating that the system should be extended to firms employing fewer than the thousands of employees that were the subject of reforms suggested by Bullock. The blurb for the pamphlet on the back page runs

The notion of industrial democracy – the involvement of employees in managerial decisions – has been around at least since the time of the Guild Socialists. However, there has been little new thinking on the subject since the Bullock Committee reported in the 1970s. This pamphlet redresses this by re-examining the Bullock proposals and looking at the experience of other European countries.

William McCarthy outlines the three main arguments for industrial democracy:
* it improves business efficiency and performance;
* most workers want a greater say in their work environment;
* a political democracy which is not accompanied by some form of industrial power sharing is incomplete and potentially unstable.

He believes, however, that the emphasis should no longer be on putting “workers in the boardroom.” Instead, he argues that workers ought to be involved below the level of the board, through elected joint councils at both plant and enterprise levels. These councils would have the right to be informed about a wide range of subjects such as on redundancies and closures. Management would also be obliged to provide worker representatives with a full picture of the economic and financial position of the firm.

William McCarthy argues that Bullock’s plan to limit worker directors to unionised firms with over 2,000 workers is out of date. it would exclude over two thirds of the work force and would apply only to a steadily shrinking and increasingly atypical fraction of the total labour force. As the aim should be to cover the widest possible number, he advocates the setting up of the joint councils in all private and public companies, unionised or otherwise, that employ more than 500 workers.

In all cases a majority of the work force would need to vote in favour of a joint council. This vote would be binding on the employer and suitable sanctions would be available to ensure enforcement.

Finally, he believes that this frame of industrial democracy would allow unions an opportunity to challenge their negative and reactionary image and would demonstrate the contribution to better industrial relations and greater economic efficiency which can be made by an alliance between management, workers and unions.

The contents consist of an introduction, with a section of statutory rights, and then the following chapters.

1: The Objectives of Industrial Democracy, with sections on syndicalism, Job Satisfaction and Economic and Social Benefits;

2: Powers and Functions, with sections on information, consultation, areas of joint decision, union objection, and co-determination;

3: Composition and Principles of Representation, with sections on selectivity, the European experience, ideas and legal framework.

Chapter 4: is a summary and conclusion.

The section on Syndicalism gives a brief history of the idea of industrial democracy in Britain from the 17th century Diggers during the British Civil War onwards. It says

The first of these [arguments for industrial democracy – employee rights] is as old as socialism. During the seventeenth century, Winstanley and the Diggers advocated the abolition of landlords and a system of production based on the common ownership of land. During the first half o the 19th century, Marx developed his doctrine that the capitalist system both exploited and “alienated” the industrial workers, subjecting them to the domination of the bourgeoisie who owned the means of production. Under capitalism, said Marx, workers lost all control over the product of their labour and “work became a means to an end, rather than an end to itself” (see Philosophy and Myth in Karl Marx, R. Tucker, Cambridge University Press, 1961). During the latter half of the nineteenth century, Sorel and his followers developed the notion of “revolutionary syndicalism” – a form of socialism under which the workers, rather than the state, would take over the productive resources of industry. Syndicalists were influential in Europe and America in the years before the First World War. They advocated industrial action, rather than the use of the ballot box, as a means of advancing to socialism (see The Wobblies, P. Renshaw, Eyre & Spottiswoode, 1967).

In Britain, syndicalism came to adopt a more constitutionalist form with the formation of the guild socialists. They did not reject the use of parliamentary action, but argued that a political democracy which was not accompanied by some form of industrial power sharing was incomplete and potentially unstable. This was the basic argument of their most distinguished theoretician, G.D.H. Cole. In more recent times a trenchant restatement of this point of view can be found in Carole Pateman’s Participation and Democratic Theory (Cambridge: Cambridge University Press, 1970).

In his earliest writing Cole went as far as to argue that socialism required that that “the workers must election and control their managers”. As he put it “In politics, we do not call democratic a system in which the proletatiat has the right to organise and exercise what pressure it can on an irresponsible body of rulers: we call it a modified aristocracy; and the same name adequately describes a similar industrial structure” (The World of Labour,Bell, 1913).

Subsequently Cole came to feel that continued existence of a private sector, plus the growth of collective bargaining, required some modification of the syndicalist doctrine behind Guild Socialism. By 1957, he was arguing for workers to be given “a partnership status in private firms, “sharing decisions” with the appropriate level of management C The Case for Industrial Partnership, MacMillan, 1957. This is very much the position advanced by Carole Pateman after her critique of more limited theories of democracy-eg those advanced by Schumpeter and others. These “minimalist” democrats took the view that in the context of the modern state, the most one could demand of a democracy was that it should provide a periodic electoral contest between two competing political elites. After reviewing examples of industrial democracy at work in a number of countries Pateman concluded “…it becomes clear that neither the demands for more participation, not the theory of participatory democracy itself, are based, as is so frequently claimed, on dangerous illusions or on an outmoded and unrealistic theoretical foundation. We can still have a modern, viable theory of democracy which retains the notion of participation at its heart.” (op. cit.)

Continued in Part 2, which will cover the sections on the pamphlet ‘Ideas’ and ‘Legal Framework’.

Corbyn Will Re-Introduce Collective Bargaining and End Zero-Hours Contracts

This looks like a piece of very good news. According to Mike, Jeremy Corbyn plans to repeal the laws passed by Blair’s government in 1999 limiting workers’ rights to have a recognised trade union, and end zero-hours contracts.

Corbyn wrote a piece in the Observer stating that he felt the changes were necessary due to the scandals over Sports Direct, Philip Green and BHS, and the Byron Hamburger chain to help immigration officials arrest 35 illegal immigrants, who were working for them.

At the moment, current legislation stipulates that a union wishing to be recognised at a workplace must show that 10 per cent of employees are members, and 50% want them to lead in pay bargaining. If that isn’t the case, then a secret ballot must be held, at which at least 40% of those able to vote do so, and the majority vote in favour of union recognition.

Corbyn, however, wants to introduce a French-style system, in which firms with over 250 members would have to recognise a specific trade union, and bargain with them over pay. He states

“Even Theresa May understands she has to pay lip service to change in the workplace and the boardroom …,” writes Corbyn.

“But the best way to guarantee fair pay is through strengthening unions’ ability to bargain collectively – giving employees the right to organise through a union and negotiate their pay, terms and conditions at work,” he writes.

“That’s why it should be mandatory for all large employers, with over 250 staff, to bargain collectively with recognised trade unions.”

Corbyn also states that he wants all workers to be given specified hours, that are written into their contracts. If an employer wants them to work beyond these hours, they are to specify the length of time and give them a reason. They will also have to give workers additional compensation, similar to an on-call payment, for being willing to work beyond their usual contracted hours, whether the workers in fact do so or not.

Mike is unsure about the wisdom of the reforms on union recognition, and would like comments on this matter from experts on trade union matters and employment law. However, he welcomes the proposal to end zero-hours contracts.

See http://voxpoliticalonline.com/2016/07/31/corbyn-pledges-to-scrap-blair-union-laws-in-favour-of-collective-bargaining-and-an-end-to-zero-hours-contracts/

The decision to end zero-hours contracts is an excellent policy. Guy Standing devotes several pages in his book, A Precariat Charter, to attacking them. They are widely recognised as a highly exploitative and pernicious system of employment for those trapped in them.

Stewart Lansley and Joanna Mack make clear that the assault on collective bargaining and the trade unions was a deliberate policy of Maggie Thatcher, and has resulted in the contraction of wages, high unemployment, and the impoverishment of the working class in their book, Breadline Britain: The Rise of Mass Poverty(London: OneWorld 2015). They write

Deteriorating opportunities are also the direct product of an about-turn in the country’s political economy. At the end of the 1970s, fighting the rising rate of inflation became the number-one economic goal, displacing the former priority given to maintaining full employment. The instruments used – tight monetary and fiscal policies and a strong pound – accelerated long-term de-industrialisation, while triggering mass unemployment. The critical decision in the 1980s to adopt a more aggressive, market-oriented model of capitalism led to the sweeping away of regulations, the favouring of finance over manufacturing, the outsourcing of public sector jobs, relentless pressure on companies to cut labour costs and, critically, an assault on labour’s bargaining power.

Cabinet papers for 1983 reveal that Mrs Thatcher admonished Norman Tebbit for being too timid on trade union reform, telling him we ‘should neglect no opportunity to erode union membership’. In Britain the proportion of the workforce covered by collective bargaining has fallen from around eighty percent in 1979 to below twenty-five percent today (fifteen percent in the case of private sector workers). This is one of the lowest levels of coverage among rich nations, adding to the heavily skewed and economically unhealthy concentration of corporate power. The UK stands at twenty-first place out of twenty-seven countries in the European Union in terms of workplace representation, though parts of the European continent are also seeing more recent falls in the level of coverage, though from a much higher base.

Britain’s much vaunted ‘flexible labour market’, engineered during the 1980s to give business greater freedom to hire and fire, was necessary, it was claimed, to enable domestic firms to compete in an increasingly globalised economy. Such freedom for employers has continued to be championed by subsequent governments. Yet, just as over-restrictive labour laws can be bad news for dynamism, so can under-restrictive laws.

Britain’s low-wage, high-unemployment economy is as much the product of these internal, political forces as of external, economic ones. Indeed, it was later admitted by one of Mrs Thatcher’s top economic advisers that one of the government’s central aims was the taming of labour. ‘The nightmare I sometimes have about this whole experience runs as follows … there may have been people making the actual policy decisions … who never believed for a moment that this was the correct way to bring down inflation. They did, however, see that it would be a very, very good way to raise unemployment.’ This was how Sir Alan Budd, chief economic adviser at the Treasury in the 1980s, summed up – in 1992 – the multilayered assault on inflation and the unions. He continued: ‘And raising unemployment was an extremely desirable way of reducing the strength of the working classes…what was engineered there, in Marxist terms, was a crisis of capitalism which created a reserve army of labour and has allowed the capitalists to make high profits ever since.’ (pp.101-3, emphasis mine).

They further write on page 242

Perhaps the most effective, and radical, measure for boosting the total wage pool at the bottom would be a rebalancing of bargaining power in favour of the workforce. Another would be a more concerted attempt to reduce the significant pay gap between men and women by raising women’s wages. Both measures would raise the share of national income going in pay and would be critical elements of an effective strategy for cutting poverty levels among the workforce.

Far from being a strength, the sustained decline in workforce bargaining power in the UK is an economic and democratic weakness. Because of the ‘wage premium’ associated with collective bargaining, this erosion of labour’s bargaining power has played a big role in wage contraction. Evidence across sixteen rich countries has shown that the higher the level of trade union membership, the lower the degree of inequality. Further, it is likely that the erosion may have encouraged British employers to move down a low-pay and productivity road. By being able to minimise pay and rely on casualised labour, British employers – unlike say their German counterparts – have had few incentives to improve skills and introduce more productive processes.

Phased in over time, such a policy mix – a boost to the minimum wage, a reduction
in the numbers on less than the living wage, wider collective bargaining coverage and lower unemployment – would put the thirty-year long trend of a shrinking wage share into reverse, and make an important contribution to reducing poverty among the low-paid, while taking some of the strain off the benefit system.

Corbyn’s decision to expand and strengthen collective bargaining therefore appears from this to be an excellent measure. It will also doubtless be attacked by the Confederation of British Industry and the right-wing press and Blairites with just about every ounce of abuse they can muster. We’ll hear once more about how this will threaten British businesses with bankruptcy, and how this will lead us all back to the strike-torn 1970s, the Winter of Discontent, and all the old Thatcherite rubbish. The reality is that Britain was no more strike-prone in the 1970s than many other countries, and much less so than America. And the Winter of Discontent was, in the views of at least one historian I’ve read, the response to the system of wage restraint buckling under the weight of political pressure it was not designed to deal with, and which the unions should not have been expected to shoulder.

Of course, the real reason for the rage at the reinstatement of collective bargaining and the ending of zero-hour contracts will be that it attacks the nearly forty years of exploitative Tory employment policies that Maggie introduced. These employment practices have caused real misery, just as Thatcher and the economists she followed, von Hayek and Milton Friedman, intended them to. They should end now.

The Fabian Society’s Recommendations for British Industrial Democracy

I’ve put up a number of pieces recently advocating various forms of industrial democracy, from the German and Austrian works councils, to the Guild Socialist version in Britain. The Labour Party was also considering introducing industrial democracy into British firms in the 1970s. This would have been extremely radical, and made up to about 50 per cent of the members of the boards of directors workers elected through the trade unions. The issue was further discussed in the Fabian Society’s pamphlet, Workers in the Boardroom: Fabian Evidence to the Bullock Committee on Industrial Democracy. In ‘Appendix 1: Conclusions of Fabian Tract “Working Power”‘, the Society laid out its recommendations for its introduction into British industry.

The Appendix states

There is now a strong case for more industrial democracy all the way up from the shop floor to the boardroom. Evidence of substantial support amongst employees and their representatives for such a development suggests that new democratic structures would have firm foundations. It is essential, however, if democratic change is to be more than a façade, that it must be backed by trade union machinery and also build on existing collective bargaining systems.

Though there are problems to be overcome in the introduction of employee participation in management, some of the fears about trade union independence lose their validity if, as has been suggested, such participation is seen as an extension of the principles of collective bargaining (if not its actual form) to areas and levels which are now the subject of managerial prerogative. What is proposed is, in face, a system of dual power (employees and management) throughout industry, including the private sector.

Labour’s strategy to promote industrial democracy should be based on the following principles:

1. A single channel of representation.

2. Strengthening, extending and building on collective bargaining.

3. A multi-dimensional approach, capable of affecting managerial decision making at all levels from shop floor to boardroom.

4. Advancing democracy in the private sector as much as the public sector.

A programme to increase industrial democracy should include the following elements.

1. The Increase of trade union membership by establishing the right to join a union, by enabling trade unions, in difficulty over recognition, to use the ACAS and, in the last resort, unilateral arbitration facilities through the court, by reforming wages councils, and by much more vigorous trade union recruitment.

2. The extension of shop floor bargaining giving shop floor representatives minimum facilities as of right, by encouraging the codification of agreements, by widening their scope to include manpower planning, safety and work design (backed by government supported experiments) and by the statutory provision of information as of right.

3. The development of company and group bargaining to fill the missing gap between shop floor bargaining and employee representation on boards.

4. The introduction of employee representatives on boards by, as a first priority, introducing 50 per cent trade union representation on nationalised industry boards and, in the private sector, by setting up a two tier board structure, which a supreme supervisory board on which 50 per cent are trade union representatives, and by changing company obligations to take account of employee interests. In the private sector, employees should be given a choice as whether they want representation on the boards or not-in organised firms through trade union machinery and in non-organised firms, under ACAS supervision. The case for an independent chairman, elected by both sides of the supervisory board, ought to be considered.

5 The recognition of trade union responsibility for a major recruitment and educational effort, and also for a close watch against arbitrary exclusion and improper use of trade union machinery. Case for an independent tribunal as final court of appeal for aggrieved individuals to be considered.

If all, or even some, of the proposals suggested are implemented, they would result in a dramatic improvement in industrial democracy. We accept that they fall short of workers’ self-management. However, they are not a barrier to the achievement of such a goal. On the contrary, they represent an important step towards its. We should always remember democratic change is a movement towards rather than a final arrival.

These are certainly radical proposals, and something like 50 per cent trade union representation may be too much for some people. but we certainly need a system like this, and improved trade union power, to protect British working people from the utter poverty and precarity now imposed by employers through zero hours contracts and so on.